Stanford Judge Approves Interim Distribution to Victims

By Tom Korosec & Andrew Harris

A plan by a court-appointed receiver to distribute assets recovered from R. Allen Stanford's Ponzi scheme to investors was approved by a federal judge in Dallas.

U.S. District Judge David C. Godbey accepted the plan by Ralph Janvey, the receiver appointed in 2009 to marshal and liquidate Stanford's personal and business assets, to make a $55 million interim distribution to about 17,000 claimants, or about 1 cent for each of the $5.1 billion lost in the fraud scheme.

"We will follow it up in a subsequent distribution as the money comes in," Janvey's attorney, Kevin Sadler of Baker Botts LLP, told Godbey at a court hearing in April.

Ponzi scheme victims of Bernard L. Madoff, who was arrested in December 2008, recovered more than $5.4 billion. Clients of the MF Global Inc. brokerage were paid about $4.9 billion after its parent, MF Global Holdings Ltd., failed in October 2011. Victims of a scheme by Peregrine Financial Group Inc. founder Russell Wasendorf, who prosecutors last year said stole $215 million, received an interim distribution of $123 million.

A federal jury in Houston last year found Stanford, 63, guilty of lying to investors about the nature and oversight of certificates of deposit issued by his Antigua-based bank. The jurors decided he must forfeit $330 million in accounts seized by the U.S. government.

The SEC case is Securities and Exchange Commission v. Stanford International Bank, 09-cv-00298, U.S. District Court, Northern District of Texas (Dallas). The criminal case is U.S. v. Stanford, 09-cr-00342, U.S. District Court, Southern District of Texas (Houston).

To contact the reporter on this story: Andrew Harris in the Chicago federal courthouse at aharris16@bloomberg.net
To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

Source.

 

Read the ORDER APPROVING RECEIVER'S INTERIM DISTRIBUTION PLAN.

STANFORD RECEIVERSHIP CERTIFICATION NOTICE

Before making distribution payments under the Interim Plan, the Receiver is required to send a Certification Notice to the Investor CD Claimants. This Certification Notice must ask each Investor CD Claimant for certification regarding whether they have applied for or received compensation for their claimed losses from sources other than the Receivership and, if so, the amount of such compensation. Investor CD Claimants must timely respond to this Certification Notice as a condition of receiving payment under the Interim Plan.
EXHIBIT B: CERTIFICATION NOTICE

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Allen Stanford Told to Disgorge $6.7 Billion in SEC Case

April 26, 2013
By Andrew Harris

R. Allen Stanford, the Texas financier convicted last year of leading an investment fraud scheme, was ordered to disgorge more than $6.7 billion by the judge in a U.S. Securities and Exchange Commission lawsuit.

U.S. District Judge David Godbey in Dallas issued the order yesterday against Stanford, his Stanford Group Co. and the Antigua-based Stanford International Bank Ltd.

The order may clear the way for Godbey to grant a court- appointed receiver's request to make an interim $55 million payout to investors who lost money after buying certificates of deposit issued by the Stanford Bank.

"The fraud perpetrated was obviously egregious, was done with a high degree of scienter, caused billions in losses and occurred over the course of a decade," Godbey said, using the legal term to describe the mental state of intent to deceive.

A federal jury in Houston convicted Stanford of lying to investors about how their money was being handled.

"The truth is that he flushed it away," Justice Department lawyer William Stellmach told jurors in his closing arguments at the March 2012 trial. "He told depositors he was using their money in one way and the truth was completely different."

Stanford, 63, was sentenced to 110 years in prison. Maintaining his innocence, he has appealed the verdict.

Parallel Judgment

Godbey referred to the jury's guilty finding in granting the SEC's request he render a parallel judgment in their case filed in February 2009, four months before the financier was indicted. The judge also cited the August 2009 guilty plea by Stanford Group Chief Financial Officer James Davis.

"The court finds that $5.9 billion is a reasonable approximation of the gains connected to Stanford's fraud," Godbey said of the sum he would order disgorged. He then added more than $861 million in interest for a total of $6.76 billion. Davis too is jointly liable.

Finally the judge imposed a $5.9 billion penalty on Stanford and a $5 million assessment against Davis, who received a five-year prison sentence.

The court-appointed receiver, Ralph Janvey, asked Godbey this month for permission to begin repaying some of the losses incurred by the more than 17,000 claimants. At an April 11 hearing, the judge told Janvey's lawyer, Kevin Sadler, he was concerned about doing so before a final order had been entered against Stanford.

Societe Generale

In a separate filing today, a group of Stanford investors asked Godbey to grant them a judgment of at least $95 million in a lawsuit against a unit of Paris-based Societe Generale SA. (GLE)

The lender's Societe Generale Private Banking (Suisse) unit took the money from a Stanford bank account with his permission in December 2008 to repay a loan made to him four years earlier, according to court papers.

The financier had caused a business funded by Stanford investor-depositor money to guarantee the loan in 2007, the investors alleged, while those depositors received no benefit. The transfer of that money to Societe Generale just two months before the SEC sued Stanford and shut down his businesses was a fraudulent transfer, the investors claimed in today's filing.

Ken Hagan and Jim Galvin, New York-based spokesman for the French bank, did not immediately reply to voicemail messages seeking comment on the allegations.

Slush Fund

Davis, the CFO, testified at Stanford's trial that the financier maintained a Societe Generale Swiss bank account, funded by investor deposits.

"It was a slush fund, just used for whatever the holder wanted to use it for," Davis said during the Houston federal court trial in February 2012.

The SEC case is Securities and Exchange Commission v. Stanford International Bank, 09-cv-00298, U.S. District Court, Northern District of Texas (Dallas). The criminal case is U.S. v. Stanford, 09-cr-00342, U.S. District Court, Southern District of Texas (Houston).

The investors' case is Rotstain v. Trustmark National Bank, 09-cv-02384, U.S. District Court, Northern District of Texas (Dallas).

To contact the reporter on this story: Andrew Harris in the Chicago federal courthouse at aharris16@bloomberg.net
To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

Source.

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SEC Order Against Stanford

April 25, 2013
By U.S. District Judge David C. Godbey

Securities and Exchange Commission, Plaintiff, vs. Stanford International Bank LTD., et al. Defendants. Civil Action No. 3:09-CV-0298-N

This Order addresses Plaintiff Security and Exchange Commission's ("SEC") motion for partial summary judgment [1779]. The Court grants the motion. The Court also denies Defendant R. Allen Stanford's motion for extension of time [1807].

The Court grants the SEC's motion for summary judgment. The Court enjoins Stanford from violating the Exchange Act § 10(b), Rule 10b-5, the Securities Act § 17(a), and the Advisers Act § 206(1) and (2), enjoins Davis violating the Exchange Act § 10(b), Rule 10b-5, the Securities Act § 17(a), and enjoins SGC and SIB from violating the Exchange Act § 10(b), Rule 10b-5, the Securities Act § 17(a), the Advisers Act § 206(1) and (2), and the Investment Company Act § 7(d). The Court finds Stanford, Davis, SGC, and SIB jointly and severally liable to disgorge the $5.9 billion fraudulently acquired by Stanford's scheme. The Court adds $861,189,969.06 of prejudgment interest to this total, for a total disgorgement liability of $6,761,189,969.06. Finally, the Court imposes a civil penalty of $5.9 billion on Stanford and $5 million on Davis.

Read the complete Order of U.S. District Judge David C. Godbey.

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Stanford Judge Lets Receiver Raise Fee, Retains 20% Discount

April 5, 2012
By Andrew Harris and Edvard Pettersson

The court-appointed receiver for R. Allen Stanford can bill his time starting this year at 2012 rates with a 20 per cent discount in spite of objections by Stanford investors who haven't received any money so far.

U.S. District Judge David C. Godbey in Dallas, in an order yesterday, imposed a 10 per cent "holdback" on out-of-pocket expenses. In a separate order today, Godbey approved the payment of $1.6 million in fees and expenses that the receiver, Dallas lawyer Ralph Janvey, had requested and said he could apply later for the held-back amount of $382,253.

Janvey's outside counsel, Kevin Sadler, argued at a hearing yesterday that the receiver's team has been working at the same pay rates since 2009. Sadler said that Janvey, who regularly charges his clients $500 an hour, has been billing $340 an hour on the Stanford case and then discounting that by 20 per cent.

A federal jury in Houston last month found Stanford, 62, guilty of fraud in what prosecutors said was a $7 billion scheme involving bogus certificates of deposit at his Antigua-based bank. He's scheduled to be sentenced on June 14. Janvey, whom Godbey appointed in February 2009 -- four months before Stanford was indicted -- and his outside professionals, including Baker Botts LLP (1143L), have been paid more than $52 million. That sum doesn't include a court-imposed $16 million hold-back.

RESPONSE OF THE OFFICIAL STANFORD INVESTORS COMMITTEE

The Official Stanford Investors Committee (the "Committee"), respectfully submits this Response to the Receiver's Motion for Approval of Request to Amend Fee Structure and Holdback [Doc. No. 1543].

The Committee, which speaks for the more than 20,000 investor victims of Allen Stanford's Ponzi scheme, opposes the relief requested by the Receiver and his team of professionals. The Receiver's professionals have been well compensated in the 3 years of this Receivership, having collected well in excess of $52 million in fees (with an additional almost $16 million in reserve via the holdback). During this same time period the investor victims have not recovered a single penny as there have been no distributions. Given the current state of this receivership, the Committee cannot agree to giving the Receiver's professionals what is widely perceived within the investor community as a "raise".

Therefore the Committee opposes the relief requested.

Response of the official Stanford investors committee to Receiver's motion to amend fee structure and Holdback.

Related documents:

The Examiner John J. Little does not oppose the Receiver's request to increase the rates billed by the Receiver and his professionals.

SEC PLAINTIFF'S RESPONSE TO RECEIVER'S MOTION TO AMEND FEE STRUCTURE AND HOLDBACK.

APPENDIX IN SUPPORT OF PLAINTIFF'S RESPONSE TO RECEIVER'S MOTION TO AMEND FEE STRUCTURE AND HOLDBACK.

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La. Stanford victims' negligence claims moving forward

March 20, 2012
By Leslie Turk

On Monday the 5th U.S. Circuit Court of Appeals in New Orleans reversed a 2011 lower-court ruling, clearing the way for state court class actions against financial advisers, lawyers and other third parties accused of aiding convicted financial Allen Stanford's $7 billion Ponzi scheme.

U.S. District Judge David Godbey in Dallas had ruled in 2011 that the federal Securities Litigation Uniform Standards Act, or SLUSA, barred the state cases in Louisiana and Texas because they were related to securities fraud.

But the federal three-judge appeals court panel said that law was only "tangentially related" to the fraud alleged by the plaintiffs, the sale of bogus CDs issued by Stanford's Antigua-based Stanford International Bank Ltd.

Defendants include Stanford financial advisers, SEI Investments Co, which was accused of inducing investors to move retirement funds into the CDs, and the insurance brokerage Willis Group Holdings.

Phillip Preis, a lawyer for plaintiffs who has estimated total losses of $1 billion among some 1,000 Louisiana investors, said the ruling was the most significant for investors since Stanford's fraud was uncovered in February 2009.

"It will allow us to assert negligence claims," Preis told the Chicago Tribune. "It's a big deal." The plaintiffs in the Preis lawsuits affected by the appeals court's decision claim that SEI Investments Co. and Stanford's financial advisers, among them Tiffany Angelle and Hank Mills, both of whom worked out of the former Lafayette office in River Ranch, either knew or should have known that Stanford was stealing their money.

Preis also told Baton Rouge's Daily Report that the ruling is significant because state law only requires that plaintiffs prove negligence, not outright fraud, on the part of those entities. Preis said the appeals court's decision makes it more likely that those people will be made whole:

Preis filed the original class action suit in Baton Rouge's 19th Judicial District against the Stanford Trust, trust administrator SEI, a major international firm, and the Louisiana Office of Financial Institutions. Defendants were able to move the suit to federal court, but the Fifth Circuit (Monday) remanded the suit back to Baton Rouge. Preis expects to meet with Judge R. Michael Caldwell during the next six weeks to set a new schedule for the suit. "All those big companies like SEI that supported Stanford," Preis says, "we have a very viable claim against them."

A Houston federal jury found Stanford guilty March 6 on 13 criminal counts, including fraud, conspiracy and obstructing the SEC's investigation. The 61-year-old could face more than 200 years in prison at his June 14 sentencing, or a maximum of about 20 years if he is sentenced to concurrent terms, the Tribune reported.

Appeals from the United States District Court for the Northern District of Texas

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